IRAQ COMPROMISE ON OIL LAW SEEMS TO BE COLLAPSING

By JAMES GLANZ; Reporting was contributed by Ahmad Fadam, Ali Hamdani and Khalid al-Ansary from Baghdad, and an Iraqi employee of The New York Times from northern Iraq.

Published: September 13, 2007

A carefully constructed compromise on a draft law governing Iraq's rich oil fields, agreed to in February after months of arduous talks among Iraqi political groups, appears to have collapsed. The apparent breakdown comes just as Congress and the White House are struggling to find evidence that there is progress toward reconciliation and a functioning government here.

Senior Iraqi negotiators met in Baghdad on Wednesday in an attempt to salvage the original compromise, two participants said. But the meeting came against the backdrop of a public series of increasingly strident disagreements over the draft law that had broken out in recent days between Hussain al-Shahristani, the Iraqi oil minister, and officials of the provincial government in the Kurdish north, where some of the nation's largest fields are located.

Mr. Shahristani, a senior member of the Arab Shiite coalition that controls the federal government, negotiated the compromise with leaders of the Kurdish and Arab Sunni parties. But since then, the Kurds have pressed forward with a regional version of the law that Mr. Shahristani says is illegal. Many of the Sunnis who supported the original deal have also pulled out in recent months.

The oil law -- which would govern how oil fields are developed and managed -- is one of several benchmarks that the Bush administration has been pressing the Iraqis to meet as a sign that they are making headway toward creating an effective government.

Again and again in the past year, agreement on the law has been fleetingly close before political and sectarian disagreements have arisen to stall the deal.

One of the participants in Wednesday's meeting, Deputy Prime Minister Barham Salih, who has worked for much of the past year to push for the original compromise, said some progress had been made at the meeting, but that he could not guarantee success.

''This has been like a roller coaster,'' said Mr. Salih, who is Kurdish. ''There were occasions where we seemed to be there, where we seemed to have closure, only to fail at that.''

''Given the seriousness of the issue, I don't want to create false expectations, but I can say there is serious effort to bring this to closure,'' he said.

The legislation has already been presented to the Iraqi Parliament, which has been unable to take virtually any action on it for months. Contributing to the dispute is the decision by the Kurds to begin signing contracts with international oil companies before the federal law is passed. The most recent instance, announced last week on a Kurdish government Web site, was an oil exploration contract with the Hunt Oil Company of Dallas.

The Sunni Arabs who removed their support for the deal did so, in part, because of a contract the Kurdish government signed earlier with a company based in the United Arab Emirates, Dana Gas, to develop gas reserves.

The Kurds say their regional law is consistent with the Iraqi Constitution, which grants substantial powers to the provinces to govern their own affairs. But Mr. Shahristani believes that a sort of Kurdish declaration of independence can be read into the move. ''This to us indicates very serious lack of cooperation that makes many people wonder if they are really going to be working within the framework of the federal law,'' Mr. Shahristani said in a recent interview, before the Hunt deal was announced.

Kurdish officials dispute that contention, saying that they are doing their best to work within the Constitution while waiting for the Iraqi Parliament, which always seems to move at a glacial pace, to consider the legislation.

''We reject what some parties say -- that it is a step towards separation -- because we have drafted the Kurdistan oil law depending on Article 111 of the Iraqi Constitution, which says oil and natural resources are properties of Iraqi people,'' said Jamal Abdullah, a spokesman for the Kurdistan Regional Government. ''Both Iraqi and Kurdish oil laws depend on that article,'' Mr. Abdullah said.

The other crucial players are the Sunnis and Prime Minister Nuri Kamal al-Maliki. Some members of one of the main Sunni parties, Tawafiq, which insists on federal control of contracts and exclusive state ownership of the fields, bolted when it became convinced that the Kurds had no intention of following those guidelines.

But the prime minister's office believes there is a simpler reason the Sunnis abandoned or at least held off on the deal: signing it would have given Mr. Maliki a political success that they did not want him to have. ''I think there is a political reason behind that delay in order not to see the Iraqi government achieve the real agreement,'' said Sadiq al-Rikabi, a political adviser to Mr. Maliki. Mr. Rikabi was at Wednesday's meeting.

Ali Baban, who as a senior member of Tawafiq negotiated the compromise, said that allegation was untrue. ''I have a good relationship'' with Mr. Maliki, he said. ''This is an issue of Iraqi unity. This could cause a split in this country.''

Mr. Maliki has suggested returning to the original language agreed to in February and trying once again to push the law through Parliament. Mr. Salih says there is basic agreement on returning to that language, but conceded that Sunni participants in Wednesday's meeting might insist on a deal that includes changes to the Iraqi Constitution to safeguard their interests in the distribution of revenues. A law on how the revenue should be shared is being developed as a critical companion piece of legislation to the draft law.

The central element of the compromise was agreed to in February after months of difficult negotiations among Iraq's political groups.

The main parties in those negotiations were Iraqi Kurds, who were eager to sign contracts with international oil companies to develop their northern fields; Arab Shiites, whose population is concentrated around the country's southern fields; and Arab Sunnis, with fewer oil resources where they predominate.

Those facts meant that the compromise law had to satisfy both the Sunni insistence that the central government maintain strong control over the fields as well as the push by the Kurds and Shiites to give provincial governments substantial authority to write contracts and carry out their own development plans.

Somehow negotiators managed to strike that balance, but soon after, the agreement began to crumble. Many of the negotiations centered on a federal committee that would be set up to review the contracts signed with oil companies to carry out the development and exploitation of the fields. The Kurds objected to any requirement that the committee would have to approve contracts. So in a nuanced bit of language, the negotiators gave the committee the power only to reject contracts that did not meet precisely specified criteria.

But problems immediately cropped up after the cabinet approved the draft law and, in what seemed to be a perfunctory step, it went to a council that was supposed to hone the language to be sure it complied with Iraqi legal conventions.

When the draft emerged from that council, the members of some parties, particularly the Kurdish ones, thought that the careful balance struck in the draft had been upset, and they accused Mr. Shahristani of meddling. Then the law languished in Parliament and, said Hoshyar Zebari, the Iraqi foreign minister, the Kurds decided to send a signal that they would not wait indefinitely and signed the contract with Dana Gas.

''It served as a reminder: 'If you keep stalling, life goes on,' '' said Mr. Zebari, who is Kurdish.

On Monday the Kurdistan Regional Government, or K.R.G., issued another rejoinder to the oil minister's views that the Kurds' moves were illegal. ''His views are irrelevant to what the K.R.G. is doing legally and constitutionally in Kurdistan,'' the regional government said.

Mr. Shahristani was apparently traveling and did not respond to e-mail messages sent Wednesday. But Saleem Abdullah al-Juburi, a Tawafiq member who participated in Wednesday's meeting, gave his own assessment of the Kurdish agreements with Hunt and Dana Gas. ''The contracts are not legal,'' he said.